Half year results

Journey Group PLC

8 September 2016

Journey Group plc("Journey" or the "Group")

Interim results

Journey Group, a leading provider of in-flight products and catering services to the international airline and travel industries announces its interim results for the six months to 30 June 2016.

The key highlights for the half year were:

Financial Highlights:

· Revenue growth of 7% to $32.7 million (H1 2015: $30.5 million)

· EBITDA increased by 50% to $2.7 million (H1 2015: $1.8 million)

· Profit before tax of $1.8 million (H1 2015: $1.0 million)

· Basic earnings per share of 11.32 cents (H1 2015 5.27 cents)

· Net cash at 30 June 2016 of $2,620,000 and at 31 August 2016 of $5,473,000

· Interim dividend of 3.4 pence per share paid on 31 March 2016 in lieu of a final dividend for the previous financial year

Operational Highlights:

· Air Fayre:

· Awarded and successfully launched contracts in mid-June with WOW Air and Dynamic International out of Los Angeles International Airport ("LAX")

· Post the period end awarded a contract with American Airlines for four daily international flights out of LAX, two of which commenced mid-July 2016 with the remainder launching H2 2016

· Watermark:

· Opened an office in the USA with encouraging number of new business enquiries

· Secured new business with Swiss International Air Lines AG

Post-period end, on 23 August 2016, the boards of Jaguar Holdings Limited and the Independent Directors of Journey Group plc announced that they had reached agreement on the terms of a recommended cash offer by Jaguar Holdings for the entire issued and to be issued share capital of Journey to be effected by means of a Court sanctioned scheme of arrangement between Journey and its shareholders pursuant to the provisions of Part 26 of the Companies Act 2006. A circular setting out the full details of the Scheme and procedures to be followed by shareholders to approve the Scheme is expected to be despatched to shareholders later today.

Stephen Yapp, Executive Chairman commented "The Group has delivered an excellent half-year performance overall, with a strong growth in profitability reflecting the impact of new customers launched in 2015 and we have continued to make good progress on our strategic objectives.

To date, our strategy for growth has worked as we have been awarded and successfully launched a range of Air Fayre's catering services to existing and new customers from our LAX facility and demonstrated the transferability of the model with the opening of the facility at Memphis.

Looking ahead, however, we are at an inflection point where future growth will require new contract wins and additional, potentially speculative, investment in capacity. Whilst the business has fared well in the public markets, the Journey Independent Directors believe that Journey will be better placed to deliver the next phase of its strategic objectives and to grow its US in-flight catering business as a private company. Consequently, as announced on 23 August 2016, Journey's Independent Directors are recommending shareholders accept the 240 pence per share cash offer for the Group.

The Board continues to expect full year performance to be in line with expectations."

Journey Group plc

 Stephen Yapp

Alison Whittenbury

Tel: +44 (0) 20 8606 1300

[email protected]

N+1 Singer (Nominated Adviser & Broker)

Nic Hellyer

Alex Price

Lauren Kettle

Tel: +44 (0) 20 7496 3000

CHAIRMAN'S STATEMENT

The Group has had a good first half of the year overall delivering results in line with expectations and making further progress strategically. Against a backdrop of adverse weather in the first quarter of 2016 and heightened economic uncertainty globally, it is encouraging that we can continue this growth momentum and shortly after the period end, the Board was delighted to announce the contract for four daily international flights from Los Angeles International Airport with an important new customer, American Airlines.

The key highlights for the half year were:

Financial Highlights:

· Revenue growth of 7% to $32.7 million (H1 2015: $30.5 million)

· EBITDA increased by 50% to $2.7 million (H1 2015: $1.8 million)

· Profit before tax of $1.8 million (H1 2015: $1.0 million)

· Basic earnings per share of 11.32 cents (H1 2015 5.27 cents)

· Net cash at 30 June 2016 of $2,620,000 and at 31 August 2016 of $5,473,000

· Interim dividend of 3.4 pence per share paid on 31 March 2016 in lieu of a final dividend for the previous financial year

Operational Highlights:

· Air Fayre:

· Awarded and successfully launched contracts in mid-June with WOW Air and Dynamic International out of Los Angeles International Airport ("LAX")

· Post the period end awarded a contract with American Airlines for four daily international flights out of LAX, two of which commenced mid-July 2016 with the remainder launching H2 2016

· Watermark:

· Opened an office in the USA with encouraging number of new business enquiries

· Secured new business with Swiss International Air Lines AG

Post-period end, on 23 August 2016, the boards of Jaguar Holdings Limited and the Independent Directors of Journey Group plc announced that they had reached agreement on the terms of a recommended cash offer by Jaguar Holdings for the entire issued and to be issued share capital of Journey to be effected by means of a Court sanctioned scheme of arrangement between Journey and its shareholders pursuant to the provisions of Part 26 of the Companies Act 2006. A circular setting out the full details of the Scheme and procedures to be followed by shareholders to approve the Scheme is expected to be despatched to shareholders later today.

MARKET CONDITIONS

Passenger numbers to May 2016 are estimated by IATA, the airline trade body, to have grown at approximately 5.3% globally. This is a rate which they describe as "robust" and in line with the average pace seen over the past decade. However, following a bumper year in 2015 there are signs that growth momentum globally has weakened slightly. This is partly attributed to the Brussels terrorist attacks and as a reflection of the ongoing fragile global economic backdrop including the uncertainty post 'Brexit'. It is anticipated, however, that there may be some stimulus in the short term from lower fares resulting from the lower oil price environment.

Reassuringly for the Group, in North America - Air Fayre's core market - carriers have focused their efforts on the larger domestic market with a key metric of domestic revenue passenger kilometres increasing 4.4% year-on-year up from 2.4% in the prior year.

RESULTS

The results for the half year were as follows:

From a financial perspective, the Group had a good first half trading with revenue increasing by 7% to $32.7million and EBITDA increasing by 50% to $2.7 million from $1.8 million mainly reflecting Air Fayre's FedEx contract in Memphis and also the UAX (United Express Jets) for a full 6 months, as this contract only launched in later April 2015. Consequently Operating Profit before tax and Profit before tax also showed increases of 76% and 78% respectively.

The tax charge decreased to approximately 24% as a result of the greater proportion of US profits and related tax charges at an average rate of 39.5% combined with a tax credit relating to year 2015, giving a Profit after tax of $1.35 million. The Basic earnings per share amounted to 11.32 cents compared with 5.27 cents last year.

Net cash as at 30 June 2016 amounted to $2.6 million comprising cash of $5.0 million offset by finance lease debt of $2.4 million. This compares with net cash at 31 December 2015 of $3.6 million and at 30 June 2015 of $7.2 million. The reduction reflects a temporary increase in trade receivables in the US division, resulting from delays in the annual price updates, along with a decrease in trade payables and a small increase in inventory days. These metrics are related to the new airline customers in recent months and associated new suppliers. Additionally, the company completed its buyback programme on 15 April 2016 with a repurchase of 164,815 shares and in so doing, returning £313,149 to shareholders.

US DIVISION

The US Division delivered a strong first half performance despite several flight cancellations as a result of adverse weather in the first quarter and the impact of the ongoing United Airlines change in the mix of the types of aircraft utilised year on year.

Revenue rose 20% to $24.9 million from $20.8m reflecting a full six months impact for both UAX Express Jets and the FedEx contract in Memphis. This also impacted EBITDA which increased by 60% to $2.3 million from $1.4 million and similarly Operating profit which more than doubled to $1.5 million from $0.7 million.

Pleasingly, two new customers were awarded and launched during the first half of the year. One contract awarded was with WOW Air, the low cost Icelandic airline, to provide a buy on board catering offering and crew meals for four weekly international flights to Reykjavik out of LAX. The other was to provide a range of catering services for Dynamic International for their four weekly flights to Cancun from LAX including hot and cold meals, snacks, crew meals and international waste handling.

In July we announced the award of the contract with American Airlines. Air Fayre will provide catering services for four daily international flights out of LAX from some additional space in the vicinity. Two flights commenced in mid-July 2016 with the remainder launching later in 2016 which will have a small positive impact on our performance in the second half of the year.

PRODUCTS DIVISION

The Products Division "Watermark" was impacted by the reduction in business from Delta Airlines. As previously explained, the contract with Delta has not been renewed and will formally come to an end in [October 2016]. Revenue fell 20% to $7.7 million from $9.7 million. EBITDA fell to $12,000 from $228,000 with an operating loss of $25,000 in comparison with $182,000 profit for the prior year period.

The strategically important opening of a US-based office in New York has enabled a focus on expanding business with the American carriers and already facilitated a number of new enquiries.

DIVIDEND

The interim dividend of 3.4 pence per share in lieu of a final dividend in respect of the year ended 31 December 2015 was paid on 31 March 2016 at a cost of £408,364. This was deemed beneficial to shareholders ahead of tax changes relating to dividends which took effect in April 2016. Consequently, the Board did not recommend the payment of a final dividend in respect of the year ended 31 December 2015.

RECOMMENDED CASH OFFER

As announced on 23 August 2016, Jaguar Holding has announced a recommended cash offer of 240 pence per share for the entire issued and to be issued share capital of Journey. This values the Group at approximately £28.4 million and is to be effected by way of a court-sanctioned scheme of arrangement. Jaguar Holdings is a private limited company incorporated in England and Wales, which was formed at the direction of Harwood Capital LLP, Journey Group's largest shareholder. A scheme circular outlining the terms of the offer and the recommendation made by the independent Directors to vote in favour of the scheme is expected to be posted to shareholders later today.

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OUTLOOK

The Group has delivered an excellent half-year performance overall, with a strong growth in profitability reflecting the impact of new customers launched in 2015 and we have continued to make good progress on our strategic objectives.

To date, our strategy for growth has worked as we have been awarded and successfully launched a range of Air Fayre's catering services to existing and new customers from our LAX facility and demonstrated the transferability of the model with the opening of the facility at Memphis.

Looking ahead, however, we are at an inflection point where future growth will require new contract wins and additional, potentially speculative, investment in capacity. Whilst the business has fared well in the public markets, the Journey Independent Directors believe that Journey will be better placed to deliver the next phase of its strategic objectives and to grow its US in-flight catering business as a private company. Consequently, as announced on 23 August 2016, Journey's Independent Directors are recommending shareholders accept the 240 pence per share cash offer for the Group.

The Board continues to expect full year performance to be in line with expectations.

Stephen Yapp

Executive Chairman

8 September 2016

UNAUDITED CONDENSED CONSOLIDATED INCOME STATEMENT

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET

UNAUDITED CONDENSED CONSOLIDATED CASHFLOW STATEMENT

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Condensed consolidated statement of changes in equity for the 6 months to 30 June 2016

Condensed consolidated statement of changes in equity for the 6 months to 30 June 2015

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Condensed consolidated statement of changes in equity for the 12 months to 31 December 2015

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. CORPORATE INFORMATION

Journey Group plc is a public limited company incorporated and domiciled in England & Wales. The Company's shares were publicly traded on the AIM market of the London Stock Exchange during the reporting period.

The principal activities of the Group are described in Note 3.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

i. Basis of preparation

The interim condensed consolidated financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting. The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the Group's financial statements for the year ended 31 December 2015, which were prepared in accordance with International Financial Reporting Standards adopted by the International Accounting Standards Board ("IASB") and interpretations issued by the International Financial Reporting Interpretations Committee ("IFRIC") of the IASB (together "IFRS") as adopted by the European Union, and in accordance with the requirements of the Companies Act applicable to companies reporting under IFRS.

The same policies and methods as followed in the annual report have been used in the preparation of the interim condensed consolidated financial statements.

The information relating to the six months ended 30 June 2016 and the six months ended 30 June 2015 is unaudited and does not constitute statutory financial statements within the meaning of section 434 of the Companies Act 2006. The Group's statutory financial statements for the year ended 31 December 2015 have been reported on by its auditor and delivered to the Registrar of Companies. The report of the auditor was unqualified and did not draw attention to any matters by way of emphasis, or contain a statement under section 498(2) or (3) of the Companies Act 2006. The interim condensed consolidated financial statements have been reviewed by the auditor and their report to the Board of Journey Group plc is included within this interim report.

3. SEGMENTAL REPORTING

The Group is organised into two primary business segments, the US and Products Divisions. These reportable segments are the strategic divisions for which financial information is provided to the chief operating decision maker.

The US Division is a supplier of catering and beverages to the domestic and international travel industry within the United States of America. The Products Division provides a broad range of travel supplies predominately to the international travel industry on a global basis. Segment revenues are based on the country of domicile of the customer; information is not available to produce segment revenues based on sales by destination.

Segmental assets include all operating assets used by a segment and consist principally of operating cash, receivables, prepayments, inventories, goodwill and property, plant and equipment, net of allowances and provisions. Where allocation across segments is not possible, they are classified as unallocated corporate assets.

Segmental information by business segment for 6 months to 30 June 2016

*Revenue is recognised on raw materials that are bought in and sold on to caterers on the basis that the risks and rewards of ownership are initially assumed by Journey Group plc and are subsequently transferred to the caterer

Segmental information by business segment for 6 months to 30 June 2015

Segmental information by business segment for 12 months to 31 December 2015

4. FINANCE COSTS

5. INCOME TAX

The Group is organised into two primary segments, the Products and the US Divisions. Geographically, the subsidiaries in Products Division are based in United Kingdom, Australia and Hong Kong and the subsidiaries in the US Division are based in United States of America. The operating income of divisions is subject to income tax in their respective geographical territories. The movement in income tax expense is the result of movement in divisional profits applicable to different tax rates.

6. EARNINGS PER SHARE

The basic earnings per share is calculated by dividing the profit attributable to equity shareholders (numerator) by the weighted average number of ordinary shares in issue during the period (denominator).

The diluted earnings per share is calculated using the same numerator, adjustable for the share based payments charge, with the denominator adjusted for the dilutive effects of share options. The dilutive effect of share options for the six months period to 30 June 2016 reflects the number issued effectively for nil value, of ordinary shares that would have been issuable at that date under the management incentive scheme.

7. PROPERTY, PLANT AND EQUIPMENT

During the period plant and equipment has been purchased amounting to $430,000 (6 months to 30 June 2015: $370,000). There were no asset disposals in the reporting period. Capital commitments contracted for but not provided for at 30 June 2016 amounted to $222,567 (30 June 2015: $nil).

8. NET CASH

9. AVAILABILITY OF INTERIM REPORT

The Interim report will be available at the Company's website www.journeygroup.plc.uk, in accordance with AIM Rule 20.